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unique situation... ...unique problems

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first off, would like to say hello to everyone. just registered with PMQ, but have been an avid website reader for some time.

i have been around the pizza business for over 10 years, starting with after school delivery leading to my first shop which opened last fall. i welcome any feedback / ideas / input on my situation.

i am a full time engineer, as well as the proud new owner of a small pizza shop. the owner of my engineering company purchased a building a few blocks from our plant and we completely renovated the interior for the business. everything is either brand new or a few years old right down to the oven, coolers, and even the kitchen sink. i also have a full liquor license which we currently use for mostly carry out 6 packs. we seat 30 people (minimum for the liquor license), and operate 7 days a week (65 hours total). our facility is immaculate and we recently scored a 99 on our health inspection (damn missing cooler thermometer!)

my current staff includes me (after work and weekends), a manager (30 hrs), a few delivery drivers, and 2 part time sandwich makers. my area has a high italian poplulation, and is saturated with pizzerias, many of which close / change hands from year to year. prices in my are are low (most places do 1 x 16" for $8.50 and 2 x 16" for $14.00 the average large hoagie is about $6.00). i currently work about 35 hours a week at the shop.

we rarely have a customer satifaction issue. our food is good. people actually call to tell us how satified they are. because this is a side venture for me, and i have a steady income from my career, i can offer people more for their money and the best ingredients. for example, we use only grande cheeses. everything is homemade (meatballs, soups, chicken salad, etc).

the financials…

i have been open for about 8 months. i have no loans or outstanding debts other than my 14 day accounts with my 2 food suppliers and last quarter’s sales tax. my labor cost hovers around 40% (keep in mind i am only there about half the time). food cost is 35% (i know this needs to be reduced, but i don’t want to cut quality). my utilities are running about 10%. i don’t include beer sales in these calculations and want that to be considered a seperate entity. long story short, at the end of the week, i just about break even (pay utilities, rent, labor, supplies, advertising, etc).

since opening, sales have dropped considerably. i know various other owners of staples in our area and they are all in the same situation. my city is not a high income area and many consider ordering out for food a luxury. fuel costs have created a double edged sword, increasing my operating costs and limiting people’s disposible income. many restaurants and bars in my area are closed days they normally would be open. it’s discouraging at best.

i need opinions on what my labor cost should be considering my unique situation, how long should i expect to be working without a paycheck, and is this a losing proposition? i am not looking to quit my job and rely on the shop exclusively, just a fair profit at the end of the year.

thank you in advance
 
Weekly sales figures will help in diagnosis.

However, off the cuff, your labor is high. I’m assuming the 35 hours you work are “free” as far as labor goes, which makes your labor% even that much higher. You’ve admitted that your food cost is high and have no desire to lower it. Being that your food is made in-house, that hurts your labor as well. If you aren’t counting beer sales in your revenue, then are you taking labor out of that side of the house as well or just using labor from the pizza shop side? If so, you’re short-changing your pizza side on labor.
 
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lazzonya:
first off, would like to say hello to everyone. just registered with PMQ, but have been an avid website reader for some time.

i have been around the pizza business for over 10 years, starting with after school delivery leading to my first shop which opened last fall. i welcome any feedback / ideas / input on my situation.

i am a full time engineer, as well as the proud new owner of a small pizza shop. the owner of my engineering company purchased a building a few blocks from our plant and we completely renovated the interior for the business. everything is either brand new or a few years old right down to the oven, coolers, and even the kitchen sink. i also have a full liquor license which we currently use for mostly carry out 6 packs. we seat 30 people (minimum for the liquor license), and operate 7 days a week (65 hours total). our facility is immaculate and we recently scored a 99 on our health inspection (damn missing cooler thermometer!)

my current staff includes me (after work and weekends), a manager (30 hrs), a few delivery drivers, and 2 part time sandwich makers. my area has a high italian poplulation, and is saturated with pizzerias, many of which close / change hands from year to year. prices in my are are low (most places do 1 x 16" for $8.50 and 2 x 16" for $14.00 the average large hoagie is about $6.00). i currently work about 35 hours a week at the shop.

we rarely have a customer satifaction issue. our food is good. people actually call to tell us how satified they are. because this is a side venture for me, and i have a steady income from my career, i can offer people more for their money and the best ingredients. for example, we use only grande cheeses. everything is homemade (meatballs, soups, chicken salad, etc).

the financials…

i have been open for about 8 months. i have no loans or outstanding debts other than my 14 day accounts with my 2 food suppliers and last quarter’s sales tax. my labor cost hovers around 40% (keep in mind i am only there about half the time). food cost is 35% (i know this needs to be reduced, but i don’t want to cut quality). my utilities are running about 10%. i don’t include beer sales in these calculations and want that to be considered a seperate entity. long story short, at the end of the week, i just about break even (pay utilities, rent, labor, supplies, advertising, etc).

since opening, sales have dropped considerably. i know various other owners of staples in our area and they are all in the same situation. my city is not a high income area and many consider ordering out for food a luxury. fuel costs have created a double edged sword, increasing my operating costs and limiting people’s disposible income. many restaurants and bars in my area are closed days they normally would be open. it’s discouraging at best.

i need opinions on what my labor cost should be considering my unique situation, how long should i expect to be working without a paycheck, and is this a losing proposition? i am not looking to quit my job and rely on the shop exclusively, just a fair profit at the end of the year.

thank you in advance
Click to expand...
My CPA advise that I keep my FL (food and labor) cost under 55%!
 
i suppose i’m looking for a successful labor percentage from someone in a similar situation, who can’t be there all the time.
 
I think you would do well to mimic the marketing and product pricing of AValanche pizza…story on PMQ…

do this…change name to somthing italian sounding…and then start walk sequence mailing…in your area you may be in a rural route area so you don;t even need to pay for addressing and labeling…

printing 4 color trifold with coupon flap 11X 17 around 8 cents each…

mailing fees at post office around 13 cents each…mail 500- 1000 a week every week…

In 3 months you will be king…

If take out or dleivery is luxury there…then do not use all real espensive food…

Regards,
JOHN
 
In my pizzeria days we mailed our city of 50,000 in a 5 week rotation …We used Canada Post unaddressed admail which essentially went to every address…It was many years ago and I do not recall the costs, however, with that in place we virtually eliminated all our other advertising except laminated cards in motels/hotels with tv channel listings and telephone instructions…No yellow pages…This created a steady volume of business week in week out…And do full colour…As I recall it was just a menu with no coupons…We sold the most expensive pizza in town…RCS…
 
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does that 40% labor include your time or not? That’s an important consideration. It’s high, no matter what–30% is much more desirable, and that 10% would sure help.

You have 2 sandwich makers? who only make sandwiches? lousy use of resources! (sorry to be blunt–if that’s not an accurate description, please correct!) Do your drivers do anything else when not on the road, or do they just sit there? Who does the pizza making, dough, prep work, etc?

with a manager only 30hrs, if your own labor is not included, something is waaaaay off kilter. Would you mind posting sales numbers?

steve
 
Thats what I do but not every week as I cant keep up with the amount of business I have right now. We have 5000 homes in our town and I do about 800 every 3rd week so evey 3 months i have covered the whole town. It cost less then .10 per address.
 
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Duccini:
I think you would do well to mimic the marketing and product pricing of AValanche pizza…story on PMQ…

do this…change name to somthing italian sounding…and then start walk sequence mailing…in your area you may be in a rural route area so you don;t even need to pay for addressing and labeling…

printing 4 color trifold with coupon flap 11X 17 around 8 cents each…

mailing fees at post office around 13 cents each…mail 500- 1000 a week every week…

In 3 months you will be king…

If take out or dleivery is luxury there…then do not use all real espensive food…

Regards,
JOHN
Click to expand...
Where did you get that trifold printed for 8 cents a piece? That’s amazing.
 
monday & tuesday / 4 to 10
just myself and a driver

wednesday / 11am to 10pm
manager - 11 to 7
driver 1 - 11:30 to 2:30
driver 2 - 3 to 10
myself - 7 to 10

thursday / 11am to 10pm
manager - 11 to 5
driver 1 - 11:30 to 2:30
driver 2 - 3 to 10
myself - 5 to 10
sandwich maker - 5 to 8

friday / 11am to 11pm
manager - 11 to 5
driver 1 - 11:30 to 2:30
driver 2 - 3 to 11
myself - 5 to 11
sandwich maker - 3 to 8

saturday / 11am to 11pm
myself - 11 to 4
driver 1 - 3 to 11
manager - 4 to 11
sandwich maker - noon to 3
sandwich maker - 5 to 8

sunday / 2pm to 10pm
manager - 4 to 10
driver 1 - 3 to 10
myself - 2 to 4
sandwich maker - 5 to 8

we’re doing
$2500 per week food
$500 per week beer
labor has dipped to 35% (not including me)
food cost 40% (which includes everything from food to cleaning supplies)
utilities (gas and electric) - $250 per week
advertising - $40 per week (phone book and newspaper)

again, i really can’t be there any more as i have a full time job.
 
my dos centavos…

it seems to me that one of the first things you might want to consider is re-thinking your hours of operation - i learned very quickly that it’s too much to ask of your customers to remember a complicated hours of operation schedule, especially during the week. all this does is guarantee that customers will head on over to your shop only to find it closed - after this happens a couple of times, they will start looking elsewhere.

not only do your hours of operation seem to vary quite a bit, but i don’t see how you can offer the same menu throughout the week given your staffing - do your offer the same menu and level of service on mon/tue as you do the rest of the week? if so, how do you manage this with just yourself and a driver?

i would think you would be better served by just closing on mon/tue and making the hours of operation for the rest of the week the same (11-11 or 11-10) - at least until you can find enough staff to open at 11 on mon/tue.
 
When sales are 2500 for a week, you are going to have a high labor %. Sales cure all labor problems. A well structured mass mailing accompanied by door hanging will raise attention. You need to take the extra step and involve yourself in the community. Your goal regarding labor should be 21% w/o your hours.

Your food cost is a bit high, but I am to understand that it includes all cleaning supplies and paper and food. Just about anything you purchase for the store (is what I assume). As the other person pointed out, a target of 50 - 55% food + labor cost is reasonable to shoot for. After all, these are the two major variable costs associated with running a quick service restaraunt, especially pizza and sandwiches.

Remember to keep your new store clean, clean, clean. Perhaps the public doesn’t even know you exist. With sales like that (no offense), I would assume that most of the town has ot tried your food. The key is getting them in the door, and let your product quality carry you…

How big is your town?
 
we have a population of about 30,000 and literally 59 listings under pizzeria in our local phone book. our area (NE pennsylvania) has been rated top 5 pizzeria concentration for years.

we are still a “well kept secret” from what customers tell me. clean isn’t even an issue, as our entire facility is brand new and our latest inspection score was 99 (damn missing cooler thermometer!)

i need to take sales to the next level and i know marketing is the answer. our new phone book just came out and i have my entire menu in that, as well as a bi-weekly ad in the newspaper. sales have been climbing the last few weeks (i hope due to the phone book).

i am ready to look into mailings, door hangers, whatever, but would like some advice. my degree is in mechanical engineering, not marketing!

thank you all for your input.
 
we were originally open monday and tuesday during the day, but business was sluggish at best. wednesday thru friday have always done pretty well. monday and tuesday night we try and do a lot of prep work and cleaning. these are definately our slowest nights, but i would say, on average, 1 of the 2 gets pretty hoppin (especially for 2 people). i failed to mention that about 75% of our business is carry out, and 75% of our delivery business is within a 5 mile radius (so that delivery driver is in the store with me much of the time and is cross trained to help out). thanks for all the input!
 
Sounds to me like a little cross-training would be beneficial to your situation.
Please let us know just what duties your drivers, sandwich makers, and mgr. have. We have a day cook (prep cook)/ mgr. and at night we have a cook/mgr and driver with extra kitchen staff during peak hours. Our drivers have other duties such as stocking and rotating products and cleaning coolers and such… they also answer phones and help cook products. We’re all on the same team with the same goal in mind. Our owner is only on the line when we really need him… he spends his time there taking care of business matters, but is mainly hands-off… so his labor is not in the picture. It sounds like your doing well, but your suffering from the normal growing pains… just tweak your staff a little and you’ll see your gross profit rise.
 
Your #1 problem is sales. $2500 a week wont cut it. Your advantage is being debt free. Go whole hog on sales for a while. Make it THE focus of every employee. Pay your manager a bonus based on sales. When you get above $5k a week, then it is time to start worrying about food and labor a little bit. Until then, SALES SALES SALES! If you can’t get the sales, get out before you DO go into debt.
 
what would everyone reccomend as the best marketing methods to investigate and what would be a good bonus deal to work out with my manager for sales incentive?
 
2-5% of all sales increases per month. If you go from $10,000 a month to $14,000 you have increased sales $4,000. The breakdown is as follows:

2% = $80.00
3% = $120.00
4% = $160.00
5% = $200.00

Keep in mind, these are very low figures for a manager bonus, but consider your sales and costs. For a profitable store, managers can and do make up to $800.00 on bonuses for the month. Sometimes higher. Perhaps you can continue to give a monthly % bonus on sales above $10,000. It is a good base number and the sky is the limit for your manager.

Once sales are higher, you can construct a multi teared bonus that focuses on hitting goals for labor % and food %. Other things include: Taking care of all complaints, everyone in uniform, store cleanliness AND store sales.

DriverX is right that you shouldn’t worry about labor so much until sales are higher. Food cost should always be maintained.

Marketing - although it is expensive, your mass mailers like advo and valpack are still number one to hit the zip codes. You just have to fill in the gaps with all the LSM you can do. This should be delegated to your manager. Look to create a commotion outside of your store with balloons, air dummies, banners, shaker boards, etc. Make people look at you when they drive by. Attend the local school board meetings and local town meetings. You are the face of your company (and your manager so take him too). Flyer everything with your menus and coupons. Parking lots, houses, businesses, strip malls, malls, hotels. Grease the gatekeepers at the local hotels and motels with free pizzas. Let them know that every hundred dollars that is taken to the hotel is worth a free large pizza and sticks for the staff when they choose.

IT’S ALL ABOUT POUNDING THE PAVEMENT!!
SHAKING HANDS AND KISSING BABIES!!
 
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